Dive Brief:
- Sprouts Farmers Market’s recent performance “is not where it needs to be,” incoming CEO Nick Konat told investors Wednesday.
- The specialty grocer plans to roll out a new pricing strategy nationally in January that will introduce more affordable entry points into its key categories for shoppers, lower prices on high-frequency and trust-building items, and showcase better value around target shoppers’ key value items, Konat said.
- While Sprouts’ net sales were up 5% during its third quarter, driven by new store openings, comparable-store sales were down 0.9%, marking the third consecutive quarter of negative comparable-store sales.
Dive Insight:
Sprouts has launched itself into fix-it mode, focusing primarily on affordability as even its core customers are checking out with smaller baskets amidst a challenging macroeconomic backdrop, Konat said during Wednesday’s earnings call. Konat is currently the grocer’s president and chief operating officer and is set to become CEO in early 2027.
Sprouts’ forthcoming pricing strategy aims to offer “more compelling value” within Sprouts’ existing assortment, Konat said.
“This is not a shift to broad-based discounting or an effort to compete on price alone,” Konat said on the call.
Going forward, Sprouts plans to make “more meaningful price investments across a broader range of products,” Konat said, adding that Sprouts already has initiatives in play that will impact the company’s fourth quarter and its plans for next year.
Sprouts will build off of existing efforts that have resonated with customers, such as goods priced below $10, its $29.99 family meals and freshly baked organic sourdough for $4, he said.
The specialty grocer is also investing in its supply chain to drive profitability, Konat said, as self-distribution provides greater control over freshness, service levels, inventory and shrink. Sprouts’ next phase of self-distribution is in the planning stages and involves a selection of private label products, he said.
Sprouts is also looking to modernize its systems, selectively applying artificial intelligence to help connect data across operations, move faster and scale more efficiently. Sprouts’ loyalty program is a driving force behind this initiative as it has provided the grocer with an increasing amount of first-party data, Konat said.
These three key investments — affordability, supply chain and technology — will impact Sprouts’ near-term margins, Konat said. Sprouts lowered its full-year 2026 outlook and now estimates its comparable-store sales will decline by approximately 1.7%.
New store growth continues to serve as Sprouts’ saving grace, acting as the driving force for the retailer’s 5% year-over-year net sales increase, which brought its sales for Q3 to $2.3 billion. Sprouts opened a record 15 new stores in Q3, CFO Curtis Valentine told investors, noting that the company has opened 27 new stores so far this year and is on track to debut 42 by the end of the year. Sprouts currently has 105 executed leases and over 160 approved new stores in its pipeline, he said.
E-commerce and private label sales also grew. Online sales increased 12% and represented more than 16% of Sprouts’ total sales in Q3, while Sprouts’ store brand once again outpaced national brands in store sales and represented around 26% of total sales, Valentine said.
Valentine noted that the cyclospora outbreak this past summer reduced comparable store sales by around 60 basis points during the quarter.
Looking ahead to 2027, Konat said Sprouts has three key priorities: grow its reach through new stores and e-commerce, add more differentiated and healthy options, and “build what’s next” by connecting its assortment with more personalized engagement and remaining ahead of the health and wellness curve.
“Sprouts must evolve faster,” Konat said. “Our level of innovation, investment and execution must rise to meet the customer and market opportunity in front of us.”
